Ocean, trucking, and air freight rates and trends for the week of May 9, 2018.
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A General Rate Increase (GRI) has been announced for the following lanes and dates:
Pacific South Loop (PS3), the first direct service from Northern India to the USWC, will begin in June.
Betting on the air freight market, Boeing plans to increase production of 767s from 2.5 to 3 a month, starting in 2020. In a recent earnings call, Boeing's CEO Dennis Muilenburg said, “We do see long-term strength in the (air cargo) market.”
Air freight demand is growing at its fastest rate since 2010, the International Air Transport Association reports. The growth of e-commerce and temperature-sensitive goods has also benefited passenger planes, as they’re “filling their bellies with more cargo.”
Select carriers (both passenger and cargo-only) have indicated that rates will increase slightly over the coming months. This is despite the fact that there is typically increased capacity heading into summer months due to additional seasonal flights for holiday travelers.
According to a recent UPS study, online shoppers are increasingly looking to international vendors when shopping. The e-commerce trend places pressure on air freight, as shoppers look for fast delivery times. The increase in demand could lead to rate increases and capacity shortages.
As trucking companies struggle to recruit and retain drivers, businesses are turning to railroads to move their products.
While rail is typically cheaper, it is also slower, which means it can’t be used for many time-sensitive goods. But with spot-market trucking prices up, shippers with costs on their mind are using rail to move goods that aren’t time-sensitive.
In an attempt to keep up with the rapidly growing demand in U.S. freight, trucking companies are seeking new drivers, and ordering big rigs at a record pace.
The Coca-Cola Co. North American division reported that freight costs were up 20% from a year ago in the first quarter. This mirrors what manufacturers and retailers across the nation are seeing, as increased transportation costs affect first-quarter earnings.
Why is capacity tightening? Many attribute the limited space to bad weather, high turnover among truck drivers, and the ELD mandate. “It’s really coming from the trucking industry and…the new electronic logging-device rules and driver shortages,” says Hasbro Chief Financial Officer Deborah Thomas.
As shippers compete for a limited amount of trucking capacity, many expect the issue to persist through 2018.
Assuming the Federal Maritime Commission approves the restructuring, the new pricing will take effect in August 2018.